Colombia’s Foreign Exchange Tax Rules for MNEs Are Difficult

Multinational corporations operating in Colombia are currently grappling with a serious compliance hurdle under the country’s recently implemented significant economic presence, or SEP, tax regime.

Although the policy aims to ensure a new nexus of taxation from digital and remote service providers, its requirement that multinationals perform foreign exchange conversion and tax payment on the same day has created near-impossible circumstances for timely compliance.

Foreign Exchange Constraint

Under Colombia’s SEP framework, nonresident companies must pay taxes based on their significant economic activity in the country—even without a physical presence established through a subsidiary. Payments are made in Colombian pesos, but multinational taxpayers usually report and operate in foreign currencies, most commonly in euros or US dollars.

The key issue arises because the Colombian tax authority, or DIAN, requires taxpayers to convert their foreign currency-denominated SEP obligations into Colombian pesos and process the payment on the same day using the official foreign exchange rate. This requirement is practically unworkable for multinational tax and finance teams that operate across jurisdictions and need internal controls, approvals, and payment infrastructure to comply with tax obligations.

Multiday Payment Process

A real-world example can illustrate the issue. For technology companies with operations in Latin America, the SEP compliance process involves multiple steps.

Data gathering. Reports are normally pulled from a database, such as Tableau dashboards or Workday, showing revenue figures in the functional currency—in this example, euros.

Tax calculation. These figures are then used for conversion and calculation of the applicable SEP tax liability. The original amount is converted from euros to US dollars, and in turn from US dollars to Colombian pesos. In this case, US dollars are used as a stepping-stone currency, given the lack of a direct EUR–COP conversion.

Review and approval. In-house tax compliance teams must review and approve the calculation. Only after this step is completed can the return be filed with DIAN.

Form submission and payment receipt. Once approved, Form 115 is submitted through DIAN’s portal to generate a payment receipt. The payment must reflect the foreign exchange rate on the date of submission.

The foreign exchange conversion and submission requirement introduces a fatal bottleneck. Internal corporate processes spanning currency conversions, tax calculations, compliance reviews, and treasury approvals typically take several days. Trying to complete this entire chain within a single day is almost impossible.

Risks and Penalties

There are serious consequences of not aligning the foreign exchange conversion with the payment dateserious. An underpayment—even if resulting from a nominal discrepancy in the foreign exchange rate used—can lead to the entire tax return being considered unsubmitted under Colombian law. This exposes taxpayers to potential penalties, late payment interest, and reputational risk.

Even companies that strive to comply in good faith are in a precarious position. If the foreign exchange rate changes between the day of conversion and the day of payment, and if payment is made using an outdated rate (even by 24 hours), the discrepancy could trigger enforcement measures.

On a separate but similar issue, entities classified as “major taxpayers” by Colombian tax authorities face another logistical hurdle. In some cases, companies must open a local bank account in Colombia. For many nonresident companies, this adds layers of complexity, from navigating local banking regulations to maintaining operational liquidity in Colombian pesos.

Industry Response

Several multinationals, acting through trade associations and other industry coalitions, have flagged these challenges as unsustainable. A recent communication with DIAN officials flagged the core concerns.

The foreign exchange conversion-payment requirement imposes a timeline incompatible with multinational internal processes.

Non-compliance or underpayment due to foreign exchange misalignment could result in the entire tax filing being invalidated.

Requirements for local bank accounts are creating further frictions for “major taxpayers.”

Proactive steps have been taken to advocate for regulatory changes. Meetings and negotiations with DIAN have taken place to discuss potential solutions and propose amendments to the current requirements. These discussions aim to facilitate compliance without compromising the policy intent behind the SEP regime.

Policy Recommendations

To restore balance between enforceability and practicality, stakeholders are urging DIAN to consider some of the following adjustments.

Foreign exchange tolerance windows. Allow foreign exchange conversion to be made within a reasonable window (two to three business days) prior to the payment date if the rate used is clearly documented.

Advance payments with reconciliation. Permit taxpayers to make advance payments based on estimated foreign exchange rates, with subsequent reconciliation once the actual payment is executed.

Centralized filing extensions. Offer extended deadlines for foreign taxpayers with decentralized operations, allowing for cross-border coordination and approval workflows.

Waiver of local bank account requirements. Enable international taxpayers to remit Colombian peso payments through authorized intermediaries or agents, without the need to open local bank accounts.

Insiders have shared that DIAN wasn’t aware of the issue until early 2025, roughly a year after the SEP regime came into force around January 2024. DIAN’s first take was to blame it on the statutory language, which explicitly states that conversion and payment dates must match.

Outlook

The SEP regime represents a bold step by Colombia to tax the digital economy in an increasingly borderless world. But without adjusting the rigid foreign exchange conversion rules and banking requirements, the system risks penalizing compliant taxpayers who are simply unable to meet unrealistic timelines.

As regulatory dialogue unfolds, Colombian authorities should adopt a pragmatic stance that preserves the spirit of SEP taxation while easing operational burdens on global businesses. For now, taxpayers and advisers must navigate this intricate web, advocating for change while mitigating compliance risks in a turbulent foreign exchange environment.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Rafael Benevides is senior tax counsel at Meta and director at the GTECS Association of Tax Professionals in Tech, specializing in international taxation, compliance, and tax controversy within the technology sector.

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